A. An employer shall determine its Arizona
withholding payment schedule for each calendar quarter by calculating the
average amount of Arizona income taxes withheld in the 4 preceding calendar
quarters. The employer shall calculate this average at the beginning of each
calendar quarter by adding the actual amount withheld in each of the 4
preceding calendar quarters and then dividing that sum by 4.
1. If the average amount of Arizona income
taxes withheld in the 4 preceding calendar quarters does not exceed $1,500, the
employer shall make its Arizona withholding payments on a quarterly basis.
Example:
An employer determines its Arizona withholding payment
schedule for the 4th calendar quarter of 1999 as follows:
3rd quarter of 1999 withholding $1,100
2nd quarter of 1999 withholding $1,600
1st quarter of 1999 withholding $1,000
4th quarter of 1998 withholding $1,200
Total withholding $4,900
Divide by 4
Average withholding $1,225
The 4 quarter average of Arizona income taxes withheld does
not exceed $1,500. Therefore, the employer shall make its Arizona withholding
payments on a quarterly basis.
2. If the average amount of Arizona income
taxes withheld in the 4 preceding calendar quarters exceeds $1,500, the
employer shall make its Arizona withholding payments at the same time as the
employer is required to make its federal withholding deposits.
Example:
An employer determines its Arizona withholding payment
schedule for the 3rd calendar quarter of 1999 as follows:
2nd quarter of 1999 withholding $1,800
1st quarter of 1999 withholding $1,400
4th quarter of 1998 withholding $1,900
3rd quarter of 1998 withholding $1,300
Total withholding $6,400
Divide by 4
Average withholding $1,600
The 4 quarter average of Arizona income taxes withheld
exceeds $1,500. Therefore, the employer shall make its Arizona withholding
payments at the same time as its federal withholding deposits.
B. An employer that
purchases an existing business shall determine its Arizona withholding payment
schedule for each calendar quarter by calculating the average amount withheld
in the 4 preceding calendar quarters as follows:
1. For the 1st quarter of withholding, the
employer shall calculate the previous owner's average amount of Arizona income
taxes withheld in the 4 preceding calendar quarters.
2. For the 2nd through 4th quarters of
withholding, the employer shall calculate the average amount withheld in the 4
preceding calendar quarters by combining its prior quarters of withholding with
the previous owner's quarters of withholding.
3. For subsequent quarters of withholding,
the employer shall add the amounts it withheld in the 4 preceding calendar
quarters and then divide that sum by 4.
C. A newly formed business shall determine
its Arizona withholding payment schedule as follows:
1. For the 1st quarter of withholding, the
employer shall make its Arizona withholding payments on a quarterly
basis.
2. For the 2nd quarter of
withholding, the employer shall determine its Arizona withholding payment
schedule based on the amount withheld in the 1st quarter of
withholding.
3. For the 3rd quarter
of withholding, the employer shall determine its Arizona withholding payment
schedule by adding the amounts withheld in the 1st and 2nd quarters and
dividing by 2.
4. For the 4th
quarter of withholding, the employer shall determine its Arizona withholding
payment schedule by adding the amounts withheld in the 1st, 2nd, and 3rd
quarters and dividing by 3.
5. For
subsequent quarters of withholding, the employer shall determine its Arizona
withholding payment schedule by adding the amounts withheld in the 4 preceding
calendar quarters and dividing by 4.
D. If 2 or more employers consolidate their
business activities to form 1 entity, the new employer shall determine its
Arizona withholding payment schedule based on the combined withholding of the
prior employers for the preceding 4 calendar quarters. Any prior employer with
fewer than 4 full quarters of withholding activity shall annualize the amounts
withheld and divide by 4. The new employer shall determine its Arizona
withholding payment schedule by combining this amount with the quarterly
averages of the other prior employers with 4 full quarters of withholding
activity.
E. The employer shall
complete the quarterly reconciliation required by A.R.S. §
43-401
by filing the quarterly tax return prescribed by the Department.
F. For calendar years beginning after
December 31, 1997, an employer may make its Arizona withholding payments on an
annual basis if all of the following conditions are met:
1. The employer has established a history of
withholding activity by filing the quarterly tax return required by subsection
(E) for at least the 4 preceding calendar quarters.
2. The employer's withholding liability was
an amount greater than zero for at least 1 of the 4 preceding calendar
quarters.
3. The average amount of
Arizona income taxes withheld by the employer in the 4 preceding calendar
quarters does not exceed $200. The employer will meet this average withholding
requirement if the total amount withheld in the 4 preceding calendar quarters
is $800 or less.
4. The employer
has timely filed the quarterly tax return and has timely made its Arizona
withholding payments for at least 3 of the 4 preceding calendar
quarters.
5. The employer has filed
the quarterly tax return for all preceding calendar quarters and does not have
a balance due (tax, penalty, or interest) for any preceding calendar
quarter.
6. The employer has filed
the annual reconciliation tax return required by A.R.S. §
43-412
for all preceding calendar years and has timely filed the annual reconciliation
tax return for the preceding calendar year.
G. An employer that makes its Arizona
withholding payments on a annual basis under subsection (F), shall file the
annual tax return required by A.R.S. §
43-401
on the form prescribed by the Department. The form shall contain all the
information required by A.R.S. §
43-412.
The employer shall make its annual Arizona withholding payment by February 28
of the year following the year for which the report was made.
H. An employer that makes its Arizona
withholding payments on an annual basis under subsection (F), may continue to
make its Arizona withholding payments on an annual basis for the succeeding
calendar year if both of the following conditions are met:
1. The average amount of Arizona income taxes
withheld by the employer in the 4 preceding calendar quarters does not exceed
$200.
Example 1:
An employer determines whether the average amount of
Arizona income taxes withheld in the 4 preceding calendar quarters does not
exceed $200 as follows:
4th quarter of 1999 withholding $200
3rd quarter of 1999 withholding $200
2nd quarter of 1999 withholding $250
1st quarter of 1999 withholding $150
Total withholding $800
Divide by 4
Average withholding $200
The average amount of Arizona income taxes withheld in the
4 preceding calendar quarters does not exceed $200. Therefore, the employer may
make its Arizona withholding payments on an annual basis for the succeeding
calendar year, if the employer also meets the condition stated in subsection
(H)(2).
Example 2:
An employer determines whether the average amount of
Arizona income taxes withheld in the 4 preceding calendar quarters does not
exceed $200 as follows:
4th quarter of 1999 withholding $200
3rd quarter of 1999 withholding $400
2nd quarter of 1999 withholding $250
1st quarter of 1999 withholding $150
Total withholding $1,000
Divide by 4
Average withholding $250
The average amount of Arizona income taxes withheld in the
4 preceding calendar quarters exceeds $200. Therefore, the employer may not
make its Arizona withholding payments on an annual basis for the succeeding
calendar year.
2. The
employer has timely filed the annual tax return and has timely made its annual
Arizona withholding payment as prescribed by subsection (G) for the preceding
calendar year.
I. If the
employer does not meet the conditions prescribed by subsection (H):
1. The employer shall determine its Arizona
withholding payment schedule for succeeding calendar quarters as prescribed by
subsection (A); and
2. The employer
shall file the quarterly tax return for succeeding calendar quarters as
prescribed by subsection (E).
J. An employer shall determine the applicable
rate of withholding for each employee as follows:
1. If an employee whose annual compensation
is less than $15,000 elects the minimum withholding rate, that rate shall apply
until 1 of the following situations occurs:
a.
Until the employee has 12 full months of work history with the employer, the
employer shall determine the employee's annualized compensation at the end of
each month. The employer may use any method of annualization that accurately
reflects the employee's annual compensation. If the employer determines that
the employee's annualized compensation is $15,000 or more, the employer shall
adjust the employee's rate of withholding beginning the next full pay period
following the determination. The employer shall adjust the rate to the minimum
rate prescribed by A.R.S. §
43-401,
unless the employee elects a higher prescribed rate of withholding for the
employee's annual compensation. The employer shall apply the minimum rate of
withholding until the employee has been employed for 12 full months, unless the
employee elects a higher prescribed rate of withholding for the employee's
annual compensation. After 12 full months of employment, the employer shall
determine the rate under subsection (J)(1)(b);
b. If the employee has 12 full months of work
history with the employer, the employer shall determine the employee's total
compensation for the 12-month period. If the records for that period show that
the employee earned $15,000 or more, the employer shall adjust the rate of
withholding beginning the next full pay period following the determination. The
employer shall adjust the rate to the minimum rate prescribed by A.R.S. §
43-401,
unless the employee elects a higher prescribed rate of withholding for the
employee's annual compensation. The employer shall apply this rate of
withholding through the end of the calendar year, unless the employee elects a
higher prescribed rate of withholding for the employee's annual compensation.
At the end of that calendar year and at the end of each succeeding calendar
year, the employer shall redetermine the employee's total annual compensation.
If the employee's annual compensation for the preceding year changes the
employee's rate of withholding, the rate change shall begin the next full pay
period following the determination; or
c. If the employee receives a salary increase
that makes the employee's annualized compensation $15,000 or more, the employer
shall adjust the employe's rate of withholding to the minimum rate prescribed
by A.R.S. §
43-401,
beginning the next full pay period following the receipt of the increase by the
employee.
2. An employee
who has elected a withholding rate higher than the minimum prescribed
withholding rate may later elect to reduce the rate to a lower prescribed rate
for the employee's annual compensation.
